European shares lurch lower on emerging market jitters

* Euro STOXX 50 Volatility Index rises 10.1 pct

* FTSEurofirst 300 down 1.4 pct at 1,272.95 points

* FTSEurofirst 300 closes at lowest since Dec. 18

* Emerging-market worries continue to weigh

* Euro STOXX 50 falls 1.7 pct to 2,963.96 points

By Sudip Kar-Gupta

LONDON, Feb 3 (Reuters) - European shares fell to a one-and-a-half month closing low on Monday, knocked back by data that showed China's economy losing momentum and by growing worries about the affect on companies of turmoil in emerging markets.

The pan-European FTSEurofirst 300 index, which in January had its first monthly loss since August, ended down 1.4 percent at 1,272.95 points - its lowest close since finishing at 1,259.06 points on Dec. 18 last year. The euro zone's blue-chip Euro STOXX 50 index also fell, by 1.7 percent to 2,963.96 points.

Uncertainty over the near-term outlook drove the Euro STOXX 50 Volatility Index up 10.1 percent to 24.02 points. The index has gained about 57 percent since Jan. 21, reflecting fears about a slump in emerging markets over the last two weeks.

Fresh evidence of a slowdown in economic growth in China came after China's official Purchasing Managers' Index (PMI) dipped in January.

Emerging markets, which depend heavily on investment from the likes of China and the United States, have been hit by uncertainty over the outlook for China and a scaling-back in U.S. economic stimulus.

The winding down of the U.S. Federal Reserve's bond-buying programme has pushed up returns on U.S. Treasuries, causing investors to buy back into Treasures while selling out of emerging-market assets.

"What's been interesting has been the scale and the rapidity with which the emerging markets have unwound," said Christopher Mahon, director of asset allocation research at Barings' Global Multi Asset Group. "Although we don't think equities will do badly and will end up higher than they were at the start of the year, we think it will come with more volatility than 2013 had."

TOO RISKY TO BUY ON THE DIP?

Shares in companies with a significant exposure to emerging markets fell sharply. Cement maker Lafarge (Munich: CIL.MU - news) fell 4 percent. Spanish bank Banco Santander (Berlin: BSD2.BE - news) - which is exposed to Latin America - also weakened 3 percent.

The STOXX Europe 600 Banking Index was also knocked by a 5.9 percent fall at Swiss bank Julius Baer (Other OTC: JBARF - news) after the bank posted lower-than-expected earnings.

In spite of the upheaval in emerging markets, many investors with looking over the whole of 2014 remain optimistic about European equities. They say stocks should gradually recover from the early declines, then gain as the economy slowly recovers.

Those with a shorter-term view said now was not the time to return to stocks. Montaigne Capital fund manager Arnaud Scarpaci said the Euro STOXX 50 could fall back to the 2,700-2,730 range. David Thebault, head of quantitative sales trading at Global Equities, also expects more near-term volatility.

"It's not yet time to buy this dip," Thebault said.